AFA object to ALP's 2019 end-date for grandfathering

The Association of Financial Advisers (AFA) has issued a statement formally objecting to the Australian Labor Party (ALP)’s plan to ban grandfathered commissions on investment and superannuation products by the end of 2019.

The AFA chief executive Phil Kewin said his organisation believed that such a move would hand yet another victory to the big end of town at the expense of small financial advice businesses and their clients.

“Attempting to turn off grandfathered commissions in such a short time frame will only serve to benefit institutions who will be able to hold onto them, with no compulsion to pass any benefit on to consumers,” he said. “Many clients currently receiving advice services for these payments will lose access to them, without any reduction in their fees.”

“If the concern is that some advisers are receiving grandfathered commissions without providing a service, then there are other options to address this issue, without negatively impacting those clients who are in grandfathered commission paying products and are happily receiving services and advice from their financial adviser,” Kewin said

Mr Kewin said the argument that grandfathered commissions have continued for too long is not reflected in the facts claiming that “there were zero cases of inappropriate financial advice as a result of grandfathered commissions during the Banking Royal Commission hearings and research by Investment Trends indicates that grandfathered commissions have declined from over 30 per cent of advice practice income in 2010 to just nine per cent in 2018.”

Author

Mike Taylor

Mike Taylor is Managing Editor of the financial services publications Money Management and Super Review. He has been a journalist for the past 41 years with a career spanning coverage of financial services, federal and state politics and industrial relations.

Hedware - are we talking about member fees charged to all regardless of inter fund (general advice) being to only a few - which is fee for no service or are you talking about the Asset Fee charged on a % basis? Considering the Industry Funds are getting increased FUM, their costs don't seem to fall - ever.

Hedware, Yes the world has moved on and not necessarily all for the better and I'm sure that there are many top advisers who do have some grandfathered commission in place, and like me would find your comment of "snots in the trough " quite offensive we all have options and ways of earning our incomes and a vanilla attitude is not the answer, that's what free enterprise is all about.

Hardware, this "lot" have learnt that there are two rules - one for the Industry Fund who rollover retail clients super to the Industry Fund under the nose of inter fund advice, paid for by charging every single member no matter how old, wealthy or poor, so that there is plenty of money to pay for heaps of staff to sit around waiting for a few members to call asking for "advice". If that is not a commission and fee for service then Hedware what is it? Industry Fund then extend their generosity to struggling every single new member (victim) insurance no matter their age financial situation, or personal situation - and charge them for advice (INTERFUND) which they must call to receive or cancel insurance. The latest misleading term is flat premium - how does that sit with fair and honest.HEDWARE, you and you like have ripped off members for too long - time to turn the light back on you - but will you have the courage to t as key responsibility?

It's not the grandfathered commissions they are really worried about, as the article states at the practice level these have declined substantially. But by association it is the Volume Based rebates that are also grandfathered and paid ( and kept often) by the licensees.

That's good advice.Charge a quarterly fee to worthy clients. Provide a quarterly portfolio report (there's plenty of software around to do a push of a key) plus a review of some of the investments in the portfolio plus a general economic and business review (and there's plenty of those on offer). Provide an annual review. Provide ad hoc advice when something might impact on portfolio such as tax change. Much better than having to go through motions to clients who are not engaged but under grandfathering commissions (now in trouble if no attempt made).Setting up a portfolio takes time and money but once underway then best for client (compounding growth) and adviser (reduce workload) to reduce churn. No SOAs and forms needed.